In 3 payback & d for-tomorrow

04/12/23

Innovation –Processes &ToolsA Two-Day Workshop

Session 2B: Making Innovation Work

04/12/23

Program Overview

1. 9.30 – 9.40 Introduction 2. 9.40 - 11.00 NABC Group Exercise 3. 11.00 - 11.15 Tea Break 4. 11.15 - 12.30 Group Presentations5. 12.30 - 1.30 Lunch Break6. 1.30 - 3.00 Making Innovation Work7. 3.00 - 3.30 Case Study Air Deccan8. 3.30 - 4.30 Payback - Introduction 9. 4.30 - 4.45 Tea Break 10. 4.45 - 5.30 Design for Today – Toyota11. 5.30 Close of Day 1

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Framework for the Practice of Innovation

Day 2

Manpower10 FacesFrooti Case

MindspaceE-Choupal

4Ms: Methods, Money, Manpower, Mindspace

Day 1

Methods5 Disciplines7 Rules

MoneyPayback

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The 5 Disciplines of Innovation

The Definition of Innovation

A relentless focus on the

creation and delivery of

new customer value to the marketplace

within a framework of business viability

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• How much should you invest in an innovative product or

service?

• How fast should you push it to market?

• How quickly can you get to optimal value?

• How much additional investment should you pour into

sustaining and building the product or service?

Making Innovation Work

Payback, or the profitability of investment, is the

only decisive indicator for success in innovation

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Measuring Payback with the Cash Curve

The most effective tool to measure payback on innovation

is the cash curve

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Source: Payback: Reaping the Rewards of Innovation (James P. Andrew and Harold L. Sirkin,

Four S Factors have a direct impact on Cash Payback

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Tata Motors - New Product Introduction (NPI) Process

• Structured process for speed - faster product innovation

• Brings in greater discipline in the start-up stage

• NPI has helped Tata Motors create a new segment in Tata Ace –

India’s first mini-truck

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Pha

ses

•Market analysis

•Competitor assessment

•Explore Prod. Options

•Product planning

Act

iviti

es

(Indi

cativ

e)

Gat

eway

D

eliv

erab

les

(Par

tial)

•Concept alternatives•QFD•Styling themes•Packaging•Manf. Feasibility•Cost targeting

•Performance & Weight analysis•Style & Spec’dev’mt. & Freeze•Vehicle & Aggregate plans•Product costing•Financial analys

•Design analysis & simulation•Alpha proto tests•Aggregate tests•Crash tests•Manf. Planning•Detail costing

•Full design validation •Beta proto tests•Production tooling•Vendor parts dev.•Install & comm. Facilities

•Quality Proving & Process validation•P0 & PP Builds•Vendor parts approval•Homologation

•9BOX & supporting docs

DR1 Sign-offs•Product Profile & tech targets•Recommended style theme•Prelim. Cost / wt targets•Prelim. Biz case

DR2 Sign-offs•Product spec & Features list•Vehicle Test Plan•Style & packaging sign off•Time & res. plan•Full Biz. case

DR3 Sign-offs•Design release•Long lead tooling signed off•Component reliability plan•Biz. Case validation

DR4 Sign-offs•Critical issues brochure•Vehicle test requirements met•Control plans signoff

DR5 Sign-offs•Launch volumes•QP build completion•Vendor partsfully approved

•Ramp up plan

•Ramp-up•PL Build

Product Strategy & Planning

Phase

Concept Evaluation

Phase

Concept Development

Phase

Product Design and

development Phase

Design Validation &

ProductionisationPhase

Pre-Production

Phase

Ramp-up Phase

Gat

eway

s

DR0DR0

Product Strategy Review

Product Strategy Review

Concept Selection

Concept Selection

Concept and Project

Approval

Concept and Project

Approval

Design Release

Design Release

Project Review

Project Review

Production Release

Production Release

Tata Motors Vehicle NPI Process – Conceptual Overview

DR1DR1 DR2DR2 DR3DR3 DR4DR4 DR5DR5 LLPIPI

Pro

ject

In

itiat

ion

Laun

ch

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Prelaunch $ 5 Billion expense swallowed Cash to sink Iridium

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Microsoft had difficulty scaling the Xbox volumes to get Payback

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Linde uses the cash curve to time the launch of new products

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3 Types of Risks in Innovation

• Executional. Can the company actually develop, produce, distribute, and support the new product or service as scheduled?

• Technical. Will the product or service work or perform as

intended or promised?

• Market. Will the product or service be accepted by customers in the amounts, at the prices, and within the time, desired?


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The cash curve identifies the size and relations between 3 risks

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Ideal! Low start-up cost, high speed and scale, low support cost

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Indica Cash Curve

-2000

-1500

-1000

-500

0

500

1000

1500

2000

2500

Years

Cu

mu

lati

ve C

ash

(R

s. C

rore

s)

1993 1998 2003

2011

Launch

Breakeven

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Group Exercise based on spreadsheet

Cash Curves for:

ACE

World Truck

Nano

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ACE Cach Curve

-600

-400

-200

0

200

400

600

800

1000

1200

1400

Year

Cu

mu

lati

ve C

ash

- R

s. C

rore

s

2001 20052013

Breakeven

Launch

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World Truck Cash Curve

-1000

-800

-600

-400

-200

0

200

400

600

800

1000

Year

Cu

mu

lati

ve C

ash

(R

s. C

rore

s)

2003 2008 2011

2015

Breakeven

Launch

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Nano Cash Curve

-1200

-1000

-800

-600

-400

-200

0

200

400

600

Years

Cu

mu

lati

ve C

ash

(R

s. C

rore

s) 200920042016

2012

Launch

Breakeven

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In the Peacock and Elephant Projects, using the Payback Cash Curve, discuss the following:

• Can the team complete the development of the product on time in order to get it into production at the targeted date?

• Will the product really meet the customer-derived spec?

• Will our production process be able to get the hoped-for yield?

• Can we produce as many units as we think we can? • How much capital investment will be required - and how might that fluctuate?

• When will we sell the first unit?

• How many units will customers buy? At what price?

• When are we going to go cash positive?

• In short, does this invention look as if it can generate cash payback? If so, when and how?

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Design for Today

Innovation is about designing solutions for customer problems.

Can you see when and why such designs might deliver outstanding customer value?

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Yesterday’s Problems,

today’s solutions

Changing Market and Customer Requirements

Flyovers


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today’s solutions


Flyovers


Today’s Problems,

yesterday’s solutions

Yoga

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today’s solutions


Flyovers


Today’s Problems,


Yoga

Today’s Problems,

today’s solutions

Antibiotics

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today’s solutions


Flyovers


Today’s Problems,


Yoga

Today’s Problems,

today’s solutions

Antibiotics

Today’s Problems,

tomorrow’s solutions

Hybrid Car

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today’s solutions


Flyovers


Today’s Problems,


Yoga

Today’s Problems,

today’s solutions

Antibiotics

Today’s Problems,


Hybrid Car

Tomorrow’s Problems,


Solar Car

Which block represents innovation? And why?

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today’s solutions


Flyovers


Today’s Problems,


Yoga

Today’s Problems,

today’s solutions

Antibiotics

Incremental Innovation(Improving yesterday’s

solutions)

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today’s solutions



Today’s Problems,


Today’s Problems,

today’s solutions

Today’s Problems,




Solar Car


Prototypes(Testing tomorrow’s

solutions)

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today’s solutions



Today’s Problems,


Today’s Problems,

today’s solutions

Today’s Problems,


Hybrid Car




Innovation

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Today’s Problems,


Hybrid CarToyota Prius

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Key Learnings

Source: Making Innovation Work (Davila, Epstein, Shelton)

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Day 2


MindspaceE-Choupal


Day 1


MoneyPayback

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7 Innovation Rules of good management

1. Exert strong leadership on the innovation strategy and portfolio decisions. (Tata Motors – led by Ratan Tata’s leadership)

2. Integrate innovation into the company’s basic business mentality. (Tata Motors – numerous innovation initiatives and programs)

3. Align the amount and type of innovation to the company’s business. (Tata Motors – Nano and World Truck focused on vehicles as a business)

4. Manage the natural tension between creativity and value capture. (Tata Motors – innovation carefully evaluated by committees)

5. Neutralize organizational antibodies.

6. Recognize that innovation is a network that includes people and knowledge -- both inside and outside the organization. (Tata Motors – intranet – Internet – Social Networking - LinkedIn forums)

7. Create the right metrics and rewards for innovation.

Source: Making Innovation Work (Davila, Epstein, Shelton)

04/12/23

The 5 Disciplines of Innovation

The Definition of Innovation

A relentless focus on the

creation and delivery of

new customer value to the marketplace

within a framework of business viability

04/12/23


Design for Today

Innovation is about designing tomorrow’s solutions

for today’s problems.

Payback

Payback, or the profitability of investment, is the

only decisive indicator for success in innovation

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SCAMPER – Tool for Innovation

04/12/23


References

1. Making Innovation Work: How to Manage It, Measure It, and Profit from It

by Tony Davila, Marc J. Epstein, Robert Shelton

2. Payback: Reaping the Rewards of Innovation

by James P. Andrew and Harold L. Sirkin

3. The Elegant Solution: Toyota's Formula for Mastering Innovation

by Matthew May

04/12/23


Glossary

1. ERC - Engineering Research Centre

2. NPI - New Product Introduction 3. TMETC – Tata Motors European Technical Center [UK, 2005]

04/12/23

Program Overview

1. 9.30 – 9.40 Introduction 2. 9.40 - 11.00 NABC Group Exercise 3. 11.00 - 11.15 Tea Break 4. 11.15 - 12.30 Group Presentations5. 12.30 - 1.30 Lunch Break6. 1.30 - 3.00 Making Innovation Work7. 3.00 - 3.30 Case Study Air Deccan8. 3.30 - 4.30 Payback - Introduction 9. 4.30 - 4.45 Tea Break 10. 4.45 - 5.30 Design for Today – Toyota11. 5.30 Close of Day 1

04/12/23


Day 2


MindspaceMental Models


Day 1


MoneyPayback

In 3 payback & d for-tomorrow

Business

Transcript of In 3 payback & d for-tomorrow